Student debt next Tsunami?.

By Jack, on October 10th, 2007

Reduction of government aid, rapidly increasing tuition, and switch to private loans to finance college have caused student debt to go through the roof. More than $17 billion is private student debt was issued in 2006, up from only $4 billion in 2001. That’s a huge increase in jyst five years, and now it has to be paid back.

Government programs have not kept up with increasing tuition. The ceiling on government-guaranteed student loans is only $23,000 over four years. So-called Pell grants have also failed to keep up with inflating charges.

That leaves students turning to companies like Sallie Mae. This government-sponsored organization now has 10 million customers, $128 billion in government backed student loans and $28 billion in private loans.

No one knows the average amount of loans outstanding or the default rate, but many experts fear that the next loan market to collapse will be this one. And, thanks to the new bankruptcy law, these debts cannot be wiped out with bankruptcy.

If you are up to your neck in this debt, there is not a heckuva lot you can do about it. But before you default, you should contact your lender and see if it is possible to work something out.